Zillow unveils new mortgage marketplace

Millions of people visit Zillow.com each month to research homes. Now, the Seattle startup is hoping that some of those people will stay on the site a little longer to find a mortgage.

Today, Zillow is unveiling a new online marketplace that will attempt to link borrowers and lenders — a move that Chief Executive Rich Barton said is a “big deal” for the company since it represents an entirely new market segment.

Barton said the goal of the new service is “to deliver power to the people through transparency and information and tools, so that they can get smarter and feel more confident about a scary process.” Like the rest of Zillow, the company plans to make money on the mortgage offering through online advertising.

Dozens of companies — from LendingTree.com to Citi’s Mortgage.com to comparison shopping service NexTag — offer places where people can obtain or research home loans.

But Zillow is trying to simplify the process with a matchmaking service that is free to both borrowers and lenders.

It works like this. A person looking for a home loan would click on the Zillow mortgage tab and anonymously post a loan request, including details around the type of loan, zip code, credit score, income, etc.

Once completed, the application is submitted to the Zillow marketplace. Lenders who have signed up with Zillow, paid a one-time $25 registration fee and been approved as a valid mortgage professional can then peruse the various loan requests. Based on the criteria, they can choose to put together a quote along with their contact information.

It is then up to the consumer to reach out to the lender to discuss the quote. Each lender also is required to have a profile page that includes an online ranking system where consumers can rate its performance on a scale of one to five.

Zillow’s entry into the home mortgage business comes at a time when many consumers are feeling less than confident about the industry and many mortgage professionals are working harder to find leads.

Because the market is in transition, Barton said, he thinks Zillow’s timing is good.

“Clearly there has been a lot of misunderstanding that has gone on in the past,” he said. “We think an educated consumer, an educated borrower is a better customer.”

Last week, Barton was talking to government officials in Washington, D.C., about its open marketplace for mortgages. He said there was a lot of enthusiasm about the idea, noting that politicians are looking to create a standardized quote form for lenders.

“A lot of what we are saying really lit up the politicians in D.C. because we seem to be answering and putting on display a lot of the things they are talking about right now,” said Barton.

By creating a marketplace, Zillow is hopeful that consumers will be able to anonymously shop for rates that apply directly to their specific loan situation.

For lenders, Zillow wants to create a system by which mortgage professionals can quickly and cheaply obtain leads.

“This is revolutionary, offering free leads to lenders has never been done before in this manner,” said Spencer Rascoff, vice president of marketing at Zillow.com.

Of course, the success of any marketplace is dependent upon people using it. At this point, Zillow has about 300 of the estimated 400,000 mortgage professionals in the U.S. signed up.

But the company is hopeful that it can attract more mortgage professionals since it claims that about 125,000 lending professionals visit Zillow every month.

There’s also no guarantee that people who visit Zillow to peruse homes will want to research mortgages.

That’s a valid concern for Barton, who says any marketplace takes time to build.

“It is certainly not going to be easy, but we are heartened and confident and patient,” he said. “I think it is a logical extension of Zillow into this business.”

And what’s next on Zillow’s agenda now that the mortgage product is open to the public?

Barton says it is looking to make a bigger push into remodeling and home improvement information. Earlier this month, it unveiled a “Dueling Digs” feature where consumers can compare kitchens, backyards, bathrooms or other home features.

“It is a fantastic advertising category … and our surveys show that there is very large consumer interest amongst our Zillow users in remodels,” he said.